Monday October 3 20916 Housing and Economic stories

TOP STORIES:

Deutsche Bank in Free Fall. Shares, CoCo Bonds Plunge. Merkel Gives Cold Shoulder on Bailout. Bank Denies Everything - (www.wolfstreet.com) Shares of Deutsche Bank got bashed 7.6% today, to €10.49 in Frankfurt, down 67% from April 2015, to the lowest level since they started trading on the Xetra exchange in 1992. They traded below that level in the early 1980s, but decades of inflation have whittled down the purchasing power so much that comparisons are meaningless. Deutsche Bank’s 5-year default probability spiked to the highest level this year. Its balance sheet, bloated with opaque risks, equals 58% of Germany’s GDP. It lost €6.8 billion last year. To hang on another day and to prop up Tier 1 capital, it has raised $20 billion in capital, in 2010 and 2014, by selling shares and diluted existing shareholders, and by issuing contingent convertible bonds. These infamous “CoCos” are designed to be “bailed in” before taxpayers get to foot the bill. Thus, they’re a measure of investor fears about getting bailed in.

Pinching Pennies in the Hedge-Fund Capital of America - (www.bloomberg.com) The lonely $250,000 S-Class coupe at Mercedes-Benz of Greenwich says it all. For six months, it’s been sitting in the showroom, shimmering in vain while models priced at only $70,000 fly out the door. “We haven’t had anyone come in and look at it,” says Joey Licari, a sales consultant at the dealership, looking over his shoulder at the silver beauty. “I feel like normally they would, maybe a few years ago.” Such is the state of affairs in Greenwich, the leafy Connecticut town famous for its cluster of hedge funds and the titans of Wall Street who occupy many a gated mansion. The rich are being maddeningly frugal, as Barry Sternlicht complained when he assailed his former hometown as possibly the country’s worst housing market. “You can’t give away a house in Greenwich,” the head of Starwood Capital Group said, causing something of a ruckus.

U.S. Bond Market’s Biggest Buyers Are Selling Like Never Before - (www.bloomberg.com) They’ve long been one of the most reliable sources of demand for U.S. government debt. But these days, foreign central banks have become yet another worry for investors in the world’s most important bond market. Holders like China and Japan have culled their stakes in Treasuries for three consecutive quarters, the most sustained pullback on record, based on the Federal Reserve’s official custodial holdings. The decline has accelerated in the past three months, coinciding with the recent backup in U.S. bond yields. For Jim Leaviss at M&G Investments in London, that’s cause for concern. 

Moody’s Cut Spurs Worst Rout for Turkey Assets Since Failed Coup - (www.bloomberg.com) Turkish assets plummeted the most since an attempted coup in July and credit risk climbed after Moody’s Investors Service cut the country’s sovereign rating to junk. The currency was headed for the lowest level in two weeks as of 4:23 p.m. in Istanbul, the Borsa Istanbul 100 Index posted the steepest decline among about 90 gauges tracked by Bloomberg globally, and the nation’s dollar debt due 2026 sank the most since July. Moody’s lowered Turkey’s sovereign rating one level to Ba1 late Friday, the highest non-investment grade, citing rising risks due to its external financing needs and slowing economic growth.

Worries over German banks sink bond issue, hit shares - (www.reuters.com) Deutsche Bank (DBKGn.DE) shares hit a record low on Tuesday and state-backed lender NordLB scrapped plans for a 500 million euro ($560 million) bond sale, underlining investor concern about the health of the financial industry in Europe's largest economy. The decision by NordLB to shelve the bond issue because of a lack of demand came a day after Deutsche, Germany's largest bank with around 100,000 employees, was forced to reassure investors it did not need government support to help meet a potential $14 billion claim from the U.S authorities. Deutsche Bank shares hit a record low of 10.19 euros and were trading down 3 percent at 10.23 euros by 1200 GMT as investors fretted over the impact of claims it missold mortgage-backed securities.

OTHER STORIES:

Stocks Fall as Deutsche Bank Leads Rout in Lenders; Bonds Climb - (www.bloomberg.com)
Deutsche Bank Slumps as Investors Question Lender’s Health - (www.bloomberg.com)

Emerging Assets Drop as Turkish Downgrade Reverberates in Market - (www.bloomberg.com)
Hong Kong Stocks Drop Most in Two Weeks as Financial Shares Fall - (www.bloomberg.com)

PBOC Drains Most Funds in Six Months Amid Debt Curb Speculation - (www.bloomberg.com)
Philippine Peso Slides to 2009 Low as Duterte Unnerves Investors - (www.bloomberg.com)
A Weaker Currency Is No Longer the Economic Elixir It Once Was - (www.bloomberg.com)
Deutsche Bank Denies Seeking Germany’s Help in U.S. Dispute - (www.nytimes.com)